Dynegy higher after Fitch update

Rating agency sees 'stable' outlook

LisaSanders

NEW YORK (CBS.MW) -- Shares of Dynegy got a boost Thursday after Fitch Ratings upgraded the company's credit outlook.

Citing a declining near-term default risk, Fitch now sees a "stable" credit outlook for Dynegy, up from "negative" previously.

Fitch also affirmed Dynegy's ratings and removed them from its review list, where they were placed on Nov. 9, 2001, for a possible downgrade.

Dynegy
DYN, -0.91%
rose by 31 cents, or 6.8 percent, to close at $4.88.

On April 2, Dynegy Holdings, a subsidiary of the parent, secured $1.66 billion in new bank lines of credit to replace two facilities with maturities of April 28 and May 27. See archived story.

Calling the refinancing one of a number of "favorable actions," Fitch said that the elimination of ratings triggers, the sale of the company's communications business and a stronger-than-expected first quarter also figured into its decision.

Other companies that successfully refinanced debt are AES Corp.
AES, -0.14%
Aquila
ILA, +2.86%
and CMS Energy
CMS, -0.14%
all of which have negative outlooks assigned by Fitch.

AES added 2 percent to close at $7.04, Aquila gained 4 percent to close at $2.89 and CMS Energy advanced 7.7 percent to close at $7.38.

Noting that the three were no doubt benefiting from Dynegy's good news, Fitch analyst Karen Anderson said investors shouldn't assume that outlook or ratings revisions would soon follow.

"Each of these companies have their own risks," Anderson said. "In the case of Dynegy, we believe the near-term default risk has been lowered and they have a pretty good liquidity position. There are ongoing concerns, but with the refinancing and the liquidity, the stable outlook is warranted."

Anderson also pointed out that Houston-based Dynegy's senior secured rating of "B-plus" and senior unsecured rating of "CCC-plus" remain well below investment grade.

In response to Fitch's action, Dynegy spokesman John Sousa said the company has regular discussions with all of the rating agencies as it works to establish "a sustainable capital structure in line with our underlying business positions."

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